The Right Mix
Keys to successful lifestyle center development in today’s economy
There are certain key factors that virtually all successful lifestyle center projects share that are positive prognostic indicators for long-term viability. While there is no magic formula and every project must be evaluated within the context of its individual market demographics, psychographics and competition, there are a number of important conceptual, design, development and leasing elements that successful lifestyle centers have in common. A closer look at some of these core factors enables us to draw some important universal conclusions about what constitutes a high-quality development.
Mixing It Up
In lifestyle center development, as in life, diversity breeds success. Lifestyle centers that are a part of larger mixed-use developments will generally perform much better than stand-alone competitors. These projects often benefit from built-in “demand” components, due to the diverse nature of their offerings and generally broader overall appeal. Virginia Beach Town Center in Virginia Beach, Virginia, is a mixed-use development that includes two hotels, condominiums and apartments, a large office component, and destination retailers and restaurants—just the right mix to breed retail success. Whether it is the on-site consistency provided by hospitality and residential elements, or the diverse combination of destination restaurants and entertainment components, variety is a tremendous asset for driving traffic and extending shopping hours. An important caveat to this rule is that, like all thoughtful development, the size and makeup of each mixed-use element must be carefully selected to suit the local and regional market, as well as the overall vision of the project.
While the appeal of a niche or specialty center cannot be entirely discounted, lean economic times tend to favor those projects with the critical mass sufficient to sustain their retail momentum. With families or individuals turning to more cautious spending habits and making fewer purchases, maintaining a position of prominence within not only the marketplace, but also the consciousness of potential shoppers, is critically important. And in the same way that planetary bodies exert a gravitational pull in proportion to their mass, the size of a project is as effective as any marketing campaign when it comes to establishing a sustainable regional presence. Southlake Town Square in Southlake, Texas, is a center that has experienced greater success and gravitational pull with each phase of additional development. This does not mean that mega-projects are a surefire success, or that smaller efforts cannot be highly profitable, but it is a reminder that the overall size and tenant makeup of a project should be calibrated to suit the market.
Virtually all high quality centers have been able to effectively strike a balance between everyday appeal and destinational attraction. The soon-to-open Legacy Place in Dedham, Massachusetts, a WS Development project, is a 675,000-square-foot center that has a Whole Foods Market (convenience), L.L. Bean (super-destination), and National Amusements’ premium theater brand Cinema de Lux (destination) as its anchors. That combination of convenience and destination is compelling for tenants and shoppers alike, as it tends to maximize the day-to-day local traffic while still bringing in “event” shoppers who are able to identify the project as a regional destination. Savvy developers will work to establish this kind of local and regional identity and encourage broader geographic appeal by leasing to a strategically diverse and carefully planned tenant mix. It takes not only a strong “work, live and play” balance to achieve this, but also a thoughtful mix of community uses, destination retailers, higher-end options and specialty tenants. While not always available to all projects, super destination retailers such as IKEA or Cabela’s have the ability to drive traffic from great distances, and can greatly expand the appeal and geographic footprint of a project. Victoria Gardens in Rancho Cucamonga, California, added a Bass Pro Shops after the center initially opened. The addition of this “uber-destination” has expanded the center’s reach significantly.
Even the most carefully conceived and skillfully executed design and leasing strategies are destined to fail if the underlying site characteristics and infrastructure support are less than ideal. The most successful projects have locational characteristics that facilitate the target market; centers with regional “destination” tenants that are likely to pull from a huge distance need correspondingly strong regional access. While project location and general accessibility is obviously important, these are factors that become elevated to the level of make-or-break status, as the integral connections between leasing and location become even more obvious.
Avoid Easy Mistakes
As vital as it is to pay attention to the things that work, it is no less important that developers avoid making the kinds of easy mistakes that often occur during challenging economic periods. One of the most common missteps is opportunistic leasing; taking the opportunity to secure tenants that are simply not a good fit for a specific market. A special challenge for higher-end lifestyle centers and projects targeting the upper end of the economic spectrum is whether to compromise the identity of the project by accommodating tenants who may appeal to a broader market segment. Ultimately, while it may be tempting to shake up a tenant roster in the interests of establishing some kind of short-term traction, that kind of reactive leasing strategy is generally not conducive to long-term success. It can also be more damaging to dilute the identity of the project. It is usually more effective to take every opportunity to solidify an established market presence rather than experiment with haphazard leasing and programming efforts.
The most important thing for developers to remember is that the more things change, the more they stay the same; industry fundamentals remain the same. Rain or shine, boom or bust, the key elements of successful lifestyle center design, leasing and development are consistent and immutable. Great density and a well-defined niche in a strong market will virtually guarantee a winner. The lack of these components will make success a much more difficult task.